Case Number: BC444368    Hearing Date: July 15, 2014    Dept: 32
CASE NAME: Kerry White v. Hollister Co.
CASE NO.: BC444368
HEARING DATE: 07/14/14
DEPARTMENT: 32
CALENDAR NO.: 4
SUBJECT: Motion for Preliminary Approval of Class Action Settlement
MOVING PARTY: Plaintiff Kerry White
RESP. PARTY: Defendant Hollister Co. [Non-opposition]

COURT’S TENTATIVE RULING

Motion for Preliminary Approval of Class Action Settlement GRANTED contingent upon Plaintiff revising sections 10 and 11 of the Proposed Notice submitted as Exhibit C to provide the specific language for the definition of “Released Claims” from the Settlement. (See Mot. Exh. A at 3; Mot. Exh. C at 5.)

ANALYSIS

SETTLEMENT CLASS DEFINITION

Class Definition in the Settlement:

“Those persons who (1) received a Promotion Card after making qualifying purchases at a California Hollister store during the 2009 Holiday Promotion; (2) did not fully redeem the Promotion Card prior to January 31, 2010; and (3) attempted to redeem their Promotion Card during the Class Period [of January 31, 2010 through August 25, 2010].” (Mot., Exh. 1, Settlement at 2.)

TERMS OF SETTLEMENT AGREEMENT

A copy of the stipulation of Class Action Settlement and Release is submitted with the moving papers as Exhibit 1. Its essential terms are as follows:

1- Class members who abide by the claims processing requirements will receive a $20 card redeemable for merchandise at Hollister stores. The cards cannot be redeemed for cash pursuant to Civ. Code § 1749.5.
2- Defendant Hollister agrees that in any future promotions in which it issues promotional cards, it will ensure the practices of its California stores comply with California law regarding card expiration dates, including the disclosure of same.
3- Defendant Hollister shall provide Plaintiff’s counsel with a listing of the promotional card serial numbers rejected as expired during the class period. Plaintiff’s counsel will process claim forms from the class members.
4- Notice will be provided to the class members via Defendant’s website and Facebook page, and also by publication in the California edition of USA Today. Where an address is available, notice will also be sent to class members.
5- Defendant Hollister shall pay the cost of the notice.
6- Class members will release any cause of action “existing or claimed to exist, including both known and unknown claims … that were or could have been brought in the Complaint, including but not limited to zeroing out and not honoring Promotion Cards after the January 30, 2010 expiration date.”
7- Plaintiff’s counsel will receive up to $100,000 in attorney fees and costs.
8- Plaintiff will received an extra $5 on his gift card.

(Mot. Exh. 1; see also Mot. 5-8.)

SETTLEMENT STANDARDS AND PROCEDURES

California Rules of Court (CRC), Rule 3.769(a) requires “A settlement or compromise of an entire class action, or of a cause of action in a class action, or as to a party, requires the approval of the court after hearing.” Rule 3.769(c) establishes that “Any party to a settlement agreement may serve and file a written notice of motion for preliminary approval of the settlement. The settlement agreement and proposed notice to class members must be filed with the motion, and the proposed order must be lodged with the motion.”

In determining whether to approve a class settlement, the court’s responsibility is to “prevent fraud, collusion or unfairness to the class” through settlement because the rights of the class members and even named plaintiffs “may not have been given due regard by the negotiating parties.” Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006) 141 Cal. App. 4th 46, 60. Furthermore, the Court must make an independent assessment of the reasonableness of the terms of the settlement. Kullar v. Foot Locker Retail, Inc. (2008) 168 Cal. App. 4th 116, 130, 133. The burden of establishing the fairness and reasonableness of the settlement is on the proponent. Wershba, supra, 91 Cal. App. 4th at 245; see also 7-Eleven Owners for Fair Franchising v. The Southland Corp. (2000) 85 Cal. App. 4th 1135, 1165-66. However:

a presumption of fairness exists where: (1) the settlement is reached through arm’s-length bargaining; (2) investigation and discovery are sufficient to allow counsel and the court to act intelligently; (3) counsel is experienced in similar litigation; and (4) the percentage of objectors is small.

Wershba, 91 Cal.App.4th at 245, citing Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1802.Yet, even if this initial presumption exists, the Court still must “independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interest of those whose claims will be extinguished.” Kullar, supra, 168 Cal. App. 4th at 130. The Wershba Court provides the following factors as guidance in that determination:

[T]he trial court should consider relevant factors, such as the strength of plaintiffs’ case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status through trial, the amount offered in settlement, the extent of discovery completed and the stage of the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement. The list of factors is not exclusive and the court is free to engage in a balancing and weighing of factors depending on the circumstances of each case. Wershba, supra, 91 Cal.App.4th at 244-45.

Of those factors, the most important is the strength of the plaintiff’s case on the merits balanced against the amount offered in settlement. Kullar, supra, 168 Cal. App. 4th at 130. However, the court does not in such analysis undertake the necessary investigation as if trying the case, but must “eschew any rubber stamp approval in favor of an independent evaluation.” Id. Nevertheless, the settlement amount need not make the class members completely whole. As the Wershba Court stated “Compromise is inherent and necessary in the settlement process. Thus, even if the relief afforded by the proposed settlement is substantially narrower than it would be if the suits were to be successfully litigated, this is no bar to a class settlement because the public interest may indeed be served by a voluntary settlement in which each side gives ground in the interest of avoiding litigation.”

ANALYSIS OF SETTLEMENT AGREEMENT
Does a Presumption of Fairness Exist?

– Agreement reached through arms’-length bargaining? Yes. The parties have engaged in significant motion practice, including two motions for class certification and the appeal of the denial of the first motion for class certification. Plaintiff’s attorney indicates that he has spent more than 600 hours on this lawsuit over the last four years, and that his associates and law clerks and spent another 120 hours. (Neal Decl. ¶ 7.) It appears that the Settlement is the product of significant negotiation and litigation.

– Investigation and discovery sufficient to allow counsel and the court to act intelligently? Yes. Although not stated in counsel’s declarations, Plaintiff represents that his counsel reviewed more than 25,000 pages of documents in discovery and conducted extensive investigation. (Mot. 11.) Given the investigation and factual development required for the motions for class certification, it is clear the parties engaged in significant discovery.

– Counsel is experienced in similar litigation? Plaintiff’s attorneys submit declaration showing significant prior experience on consumer protection matters and class actions. (see Fletcher Decl. ¶¶ 3-4; Neal Decl. ¶ 3.)

– Conclusion: the settlement is entitled to a presumption of fairness.

– Is the settlement fair, adequate and reasonable?

– Strengths and weaknesses of Plaintiffs’ case.

According to the operative complaint, this is a class action alleging that on or around December 2009 Defendant Hollister issued twenty-five dollar ($25.00) gift cards pursuant to a promotion to any customer whose total purchase was seventy-five dollars $75.00 or greater. On or around December 14, 2009 Plaintiff received a twenty-five dollar ($25.00) gift card as a promotion for purchasing eighty-four dollars and eighty-two cents ($84.82) worth of merchandise from Defendant at a location in the State of California. Pursuant to California Civil Code Section 1749.5(d) and 1749.5 (d)(l) promotional gift cards that expire on a certain date are required to have the expiration date appear in capital letters in at least 10 point font on the front of the gift card. In this case Defendant violated California Civil Code Section 1749.5(d)(1) because the promotional gift cards that they issued expired on a certain date reducing the card’s balance to zero without expressing any expiration date on any part of the gift card whatsoever. After White received the gift card, he gave the gift card to his daughter as a Christmas gift. When White’s daughter attempted to use the gift card the cashier refused to honor the card indicating it had expired on February 1, 2010, and now had no funds, which meant the gift card had a zero balance.

There are significant risks in Plaintiff taking the case to trial. In particular, Defendant Hollister claims that it disclosed the expiration date via a number of means, including numerous signs, posters, and banners in the stores, via sleeve in which the Promotion Cards, via its website, and via emails to consumers. Hollister also has presented evidence that its employees were aware the Promotion Cards expired and verbally told consumers. Also, it might be difficult for Plaintiff to prove damages as to each class member.

In contrast, the Settlement provides significant benefits to the Class given the claims in the case by returning nearly the entire original value of their Promotion Card ($20 of $25) regardless of whether the class member had used some portion of the card. Moreover, this is precisely the remedy that class members could hope to obtain through litigation. Accordingly, based on the strengths and weaknesses of Plaintiff’s case, the settlement appears fair and reasonable.

– Attorney’s Fees and Costs.

The Settlement provides for payment of maximum attorney’s fees and costs of $100,000 to Plaintiff’s counsel. In his declaration, Plaintiff’s attorney indicates that he has spent more than 600 hours on this lawsuit over the last four years, and that his associates and law clerks and spent another 120 hours. (Neal Decl. ¶ 7.)

Prior to the final fairness hearing, Class Counsel must submit briefing and supporting declarations regarding a lodestar calculation of the attorneys’ fees sought. At the time of final approval, the Court will determine whether the attorneys’ fees sought are reasonably related to the work performed before approving any fee award. (Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal. App. 4th 123, 128.)

However, based on the significant benefits obtained for the Class and the amount of hours expended thus far, a $100,000 fee award appears reasonable at this preliminary stage.

– Enhancement Award

At the time of final approval, Plaintiff must submit declarations attesting to why he should be entitled to enhancement awards of any amount. The California Court of Appeal has made it clear that trial courts should not sanction enhancement awards of thousands of dollars with “nothing more than pro forma claims as to ‘countless’ hours expended, ‘potential stigma’ and ‘potential risk.’ Significantly more specificity, in the form of quantification of time and effort expended on the litigation, and in the form of reasoned explanation of financial or other risks incurred by the named plaintiffs, is required in order for the trial court to conclude that an enhancement was “necessary to induce [the named plaintiff] to participate in the suit….” (Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806-07.)

However, at this point, Plaintiff’s request for an enhancement of $5 appears modest and reasonable. This is a small enhancement award and is justified based on Plaintiff’s participation in discovery and in the case.

– Claims Administration Costs

Plaintiff’s counsel will administer the claims. It appears that the Settlement does not provide for any additional claims administration costs.

– Risk, Expense, Complexity, and Duration of Further Litigation

It stands to reason that settling the case would avoid significant risk and expense. Also, based on the parties’ papers for the motions for class certification and as discussed in Defendant’s non-opposition, it appears there were significant risks for Plaintiff of taking this case to trial.

– Release of Claims

Class members will release any cause of action “existing or claimed to exist, including both known and unknown claims … that were or could have been brought in the Complaint, including but not limited to zeroing out and not honoring Promotion Cards after the January 30, 2010 expiration date.”

Although the release is seemingly broad, it should be interpreted in light of the arms-length negotiations, the favorable monetary terms, and the risks of taking the case to trial. However, the court interprets the release in context as being strictly limited to claims relating to the $25 Promotion Cards at issue in the litigation and not extending to any other claims class members may have against the Defendant. If the Defendant takes the position that the release could be read as extending beyond Promotion Card related claims, the subject should be raised at the hearing. Under the totality of the circumstances, and assuming the scope of the release as envisioned by the court, the release of claims is fair and reasonable.

– Extent of discovery completed.

As noted earlier, the extent of investigation and discovery was sufficient to allow the parties to reach an intelligent settlement.

– Views of Counsel.

It appears from the moving brief that Counsel considers the settlement to be fair and reasonable in light of his firm’s investigation and evaluation of the evidence and law.

– Claims Processing

– Conclusion

Based on the totality of circumstances, the Court preliminarily approves the Settlement as fair and reasonable.

Conditional Class Certification?

Although a detailed analysis of the elements required for class certification is not required, it is advisable to review each element when a class is being conditionally certified. Amchem Products, Inc. v. Windsor (1997) 521 U.S. 591, 620, 622-627. The trial court can appropriately utilize a different standard to determine the propriety of a settlement class as opposed to a litigation class certification. Specifically, a lesser standard of scrutiny is used for settlement cases. Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1807 n. 19.

On October 3, 2013, the court granted Plaintiff’s motion for class certification as to the proposed subclass of those persons who attempted to redeem defendant’s promotional gift cards after the expiration date of January 30, 2010 and before August 25, 2010 (date of filing of complaint). As the court found in its order granting the motion, the elements of ascertainability, numerosity, typicality, predominance, adequacy, and superiority are all present here with respect to the subclass approved on October 3, 2013.

– Notice to Class of Final Approval Hearing

– Required Contents of Notice:

– Class definition? Yes__X__. No____.
– Description of substantive issues and proceedings? Yes__X__. No____.
– Neutral description of the proposed settlement? Yes__X__. No____.
– Amount of attorneys’ fees and expenses? Yes____. No_X__.
– Amount of enhancement fee? Yes____. No__X__.
– How to file a Claim? Yes__X__. No___.
– Right to opt-out of the settlement class? Yes__X__. No____.
– Right to appear by counsel and how to object to the settlement? Yes__X__. No____.
– Consequences of remaining a settlement member? Yes__ X __. No____.
– Identity of plaintiffs’ and defendant’s counsel? Yes__X__. No____.
– Date, time and place of the fairness hearing? Yes__X__. No____.

Except as indicated below for the “Release Claims,” the proposed notice includes all the necessary information to fully inform the class members of their rights with respect to the settlement. (Mot. Exh. C.)

However, the notice does not provide the exact definition of the “Settled Claims” that would be dismissed. It states the class members will give up the right to sue regarding “any issues related to the Settled Claims”, which is defined as claims that Defendant “did not properly disclose the expiration date of the Promotion Cards.” (Mot. Exh. C at 1, 5-6.) Given the broader release language included in the Settlement, the class members are entitled to additional notice as to the release. Accordingly, the motion is granted contingent upon Plaintiff revising sections 10 and 11 of the Proposed Notice to provide the specific language for the definition of “Released Claims” from the Settlement. (See Mot. Exh. A at 3; Mot. Exh. C at 5.)

– Method of Notice:

As summarized in the moving papers at pages 7 to 8, Notice will be provided to the class members via Defendant’s website and Facebook page, and also by publication in the California edition of USA Today. Where an address is available, notice will also be sent to class members by email or writing. (See also Mot. Exh. A at 6.) The parties indicated in the Agreement that “discovery has revealed that Hollister’s records do not permit identification of the vast majority of the Class Members.” The evidence in the class certification motion suggested that Defendant has used its website, Facebook page, and similar publication methods to communicate with its customers. Thus, under the circumstances, this type of notice appears sufficient, especially given that the Settlement proposes at least three forms of mass communication regarding the Settlement.

– Proposed Timeline of Settlement Procedures:

Plaintiff has not provided this information with the motion.

Based on the foregoing, the motion is GRANTED contingent upon Plaintiff revising sections 10 and 11 of the Proposed Notice submitted as Exhibit C to provide the specific language for the definition of “Released Claims” from the Settlement. (See Mot. Exh. A at 3; Mot. Exh. C at 5.)

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1 Exhibit C is the proposed notice to be posted on Defendant’s website and Facebook page, and also emailed or sent to class members. Given the space limitations of notice by publication in USA Today (Exhibit D), it seems appropriate that less detail be provided on this notice.